Kodak to spin off businesses in settlement with largest creditor

Eastman Kodak Co., which plans to file its draft bankruptcy reorganization plan on Tuesday, said Monday it had reached a comprehensive settlement agreement with its largest creditor.

The deal with the U.K. Kodak Pension Plan calls for Kodak to spin off its Personalized Imaging and Document Imaging businesses under new ownership to KPP for cash and non-cash consideration of $650 million.

Some proceeds will be used to support the emergence of Kodak from Chapter 11 and the growth of its Commercial Imaging business. The agreement also settles roughly $2.8 billion of claims by KPP against Kodak and affiliates.

“In one comprehensive transaction, Kodak will realize its previously announced intention to divest its Personalized Imaging and Document Imaging businesses and settle its largest legacy liability,” Kodak chairman and CEO Antonio Perez said in a statement. “The KPP transaction moves us past several key hurdles in our reorganization.”

The agreements resolves all potential claims worldwide, assuring continued operations outside of the United States, Perez said. It also places the Personalized Imaging and Document Imaging businesses with a new owner that recognizes their value and is focused on their growth and success. In addition it provides the remaining liquidity Kodak requires to emerge from Chapter 11.

The agreement will be implemented as part of Kodak’s Chapter 11 plan in the United States, Kodak said. The company intends to file a draft Chapter 11 plan with the Bankruptcy Court on Tuesday, and to seek approval of the KPP settlement and related transactions promptly.

KPP Chairman Steven Ross said KPP and Kodak have been working collaboratively since the beginning of the case.

“This acquisition provides security for and delivers the greatest value to, the KPP members. Overall, this settlement gives the KPP members greatly improved future prospects whilst being good for Kodak’s employees, its creditors and for UK businesses,” he said in a statement. “The businesses that we are acquiring will deliver long-term cash flows to support the plan’s obligations. The financial stability that KPP will provide for the Personalized Imaging and Document Imaging businesses will be beneficial to those businesses’ employees, customers and partners.”

Kodak also on Monday reported its financial results for the first quarter.

The company posted consolidated net earnings of $283 million, compared with a loss of $366 million a year ago. The profit reflects improved results of the Commercial Imaging segments, the company said. It also includes a $535 million gain recorded on the sale of Kodak’s digital imaging patent portfolio, partially offset by a $77 million non-cash goodwill impairment charge related to the patent sale.

Sales from continuing operations totaled $849 million in the quarter, down 9 percent from $928 million.

Kodak’s cash balance at the end of the first quarter stood at $1.17 billion, up from $1.14 billion at the end of 2012.